Causal Linkages Among Cryptocurrency and Emerging Market Indices: An Empirical Investigation

Abstract

The possibility of including financial instruments, such as equity, debt, derivative and market-based funds, in a portfolio varies with their market sensitivity. Cryptocurrency (crypto) has been of recent origin and interest to investors and policymakers. The study has attempted to explore opportunities for Indian and international investors in equity and crypto markets. Bivariate analysis between the crypto index and Indian market indices revealed few causal linkages between crypto and other indices. Standard VAR and Granger causality have been used for exploring the association between the variables. DCC-GARCH has been applied for checking further on volatility spillover and the relationship between indices. Granger results indicate the presence of linkages between crypto and energy, media, and oil & gas indices. However, spillover results have shown an absence of such linkages in the short run but a significant presence in the long run except for a few indices.